COMPANY SALE STRUCTURES
Every deal is different and purchasers and vendors may have different ways of achieving what they want. Some examples:
“Earn-Out” means that a part of the purchase price may be paid to the vendors over a period of time after completion (“on the drip”) provided for example that they stay working for the company and/or the company achieves certain pre-agreed profit or other targets.
“Vendor Financed” means that part of the purchase price may be loaned to the purchaser by the vendor to enable completion to take place. Normally the vendor will get, as security for the loan, either loan notes or a hybrid form of shares; they may also get a mortgage over the company, although this is usually a second mortgage behind the bank or a personal guarantee from the purchaser. Vendors traditionally are reluctant to provide this sort of finance; however it may be required in order to achieve the sale price they are seeking.
“Lock-Step” means that the purchasers buy an initial shareholding which is then increased as certain milestones are achieved.
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